Lawmakers falter at finish in bid to protect workers in non-competes

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STATE HOUSE — House and Senate lawmakers came tantalizingly close to reaching a deal that would have limited the use of non-compete agreements between employers and employees, but couldn’t overcome differences over how compensation for workers who sign such contracts would be negotiated.

House and Senate leaders had been working to craft a proposal restricting non-competes, which critics contend have been abused by some employers and limit the creation of start-up companies and the free movement of workers in innovation industries. Some large companies, however, defend the agreements as protection against the theft of proprietary information and protection of their investments in worker training.

“We were not able in conference to reach a compromise on the non-compete. I find that unfortunate, but for now it is not going to be passed this session,” said Sen. Daniel Wolf, the lead Senate negotiator on the conference committee opposite Rep. Brian Dempsey.

While the Senate had backed legislation limiting the duration of such contract clauses to three months with employees getting compensation at a 100 percent rate for the duration of their non-compete, Wolf said Senate conferee were ready to agree to a one-year limit favored by the House at 50 percent compensation.

The deal fell apart over a disagreement about when the so-called “garden leave” clauses stipulating the terms of how an employee would be compensated would be negotiated. All three House conferees, including Reps. Dempsey, John Scibak and Jay Barrows, signed the jacket on a compromise bill, but senators would not go along.

“I’m very disappointed. We know that it is an unfair practice to a lot of workers in the commonwealth and really inhibiting their ability to make a living and support their families in a fair way and we also know that it is putting a burden on the economy, the innovation economy, the ability for entrepreneurs to start businesses and for employees to freely move around the workplace to help an economy that should be vibrant and healthy and can be more vibrant and healthy,” Wolf told the News Service.

Both the House and Senate had included a section in their bills that would have allowed employers and employees to come to a mutual agreement outside of the “garden leave” compensation policy of equal or higher value.

With non-competes typically negotiated at the start of a worker’s employment, Scibak said the House conferees believe the term of compensation should be reached at the that point. Wolf, however, said by not allowing an employee to negotiate the terms upon exit the employer would have “all the leverage” and it would “not allow for a good two-sided negotiation.”

“There was a clause in the bills that we could not come to agreement on which would have basically eviscerated the garden clause and we just felt like we had to hold firm on that,” Wolf said.

Both the House and Senate were also in support of prohibiting employers from enforcing the agreements on minimum wage workers, college students or employees 18 and younger.

Scibak said the failure to reach a deal will only hurt employees being taken advantage of by having to sign non-competes.

“By this bill dying, the employees, the low-income employees, the employees working at sandwich shops in some of the most egregious situations, are still going to be subject to non-competes and the failure to come up with an agreement is unfortunate for those employees moving forward,” Scibak, a South Hadley Democrat, said.

The New England Venture Capital Association, which had advocated for the elimination or reform of non-compete agreements, said it has been prepared to support a “middle ground” between the House and Senate version.

“While it is disappointing that interests on the other side of the issue caused efforts at compromise to be ineffectual, we are encouraged that legislators in both the House and Senate agree with our position: that noncompetes are both unfair to workers and bad for the economy,” said Jody Rose, executive director of the NEVCA, in a statement.

Wolf said the Senate would have had the votes this session to ban the use of non-competes altogether, as California has, and remains hopeful that the Legislature will try again next session even though he won’t be on Beacon Hill. Wolf is not running for re-election this fall.

“We started at a compromise position and I think in the Senate there’s certainly a mode of force to get this done next session. I certainly hope that happens,” Wolf said.

Asked if there was hope for the bill next session, Scibak said, “We’ll see, we will see.”

— Written by Matt Murphy

Copyright State House News Service